AUD/USD - Aussie Pauses After Strong Gains

The Australian dollar is flat on Friday, as the pair is trading slightly below the 0.72 line on the European session. On the release front, the RBA policy statement was mildly optimistic, while Australian Retail Sales slipped to 0.0%, missing expectations. In the US, there are two key events – Nonfarm Payrolls and Average Hourly Earnings. Traders should be prepared for possible volatility from the pair during the North American session.

The RBA sounded cautiously optimistic in its quarterly policy statement. The central bank said that the Australian economy was benefiting from low inflation and stronger employment, as well as the weak Australian dollar. Growth is expected to remain steady in 2016, between 2.5 and 3.5 percent. On the monetary front, the RBA repeated its easing bias which it spelled out earlier this week, when it held interest rates at 2.00%. Policymakers also noted concern about the economic slowdown gripping China, which is Australia’s largest trading partner. The statement said that further fallout from China could “adversely affect commodity prices including those that are important to Australia”, a clear reference to the Australian export sector which has been hurt by weaker Chinese demand.

The Australian dollar has jumped on the greenback selloff, taken full advantage of weak US numbers, notably employment data. On Wednesday, ADP Nonfarm Payrolls dropped to 205 thousand in January, much weaker than 257 thousand a month earlier. There was further weak data from ISM Non-Manufacturing PMI, a key gauge of the services sector. The index dipped to 53.2 points in January, its worst showing since March 2014. Unemployment claims rose unexpectedly to 285 thousand, above the forecast of 279 thousand. The week wraps up with Nonfarm Payrolls, a crucial indicator which can have a strong impact on the movement of AUD/USD. The markets are braced for a sharp drop in the January report, and if this occurs, we could see the US dollar lose more ground on Friday.

AUD/USD Fundamentals

Thursday (Feb. 4)

19:30 RBA Monetary Policy Statement

19:30 Australian Retail Sales. Estimate 0.0%. Actual 0.5%

Friday (Feb. 5)

8:30 US Average Hourly Earnings. Estimate 0.3%

8:30 US Nonfarm Employment Rate. Estimate 5.0%

8:30 US Trade Balance. Estimate -42.9B

15:00 US Consumer Credit. Estimate 16.1B

*Key events are in bold

*All release times are EST

AUD/USD for Friday, February 5, 2016

AUD/USD February 5 at 6:50 EST

AUD/USD Open: 0.7198 Low: 0.7171 High: 0.7211 Close: 0.7184

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.6931

0.7063

0.7100

0.7213

0.7385

0.7489

Click to enlarge

The pair was flat in the Asian and European sessions

0.7100 is providing support

0.7213 remains under strong pressure in resistance

Current range: 0.7100 to 0.7213

Further levels in both directions:

Below: 0.7100, 0.7063, 0.6931 and 0.6848

Above: 0.7213, 0.7385 and 0.7489

OANDA’s Open Positions Ratio

AUD/USD ratio is showing little movement on Friday, consistent with the lack of movement from AUD/USD. Long and short positions are close to evenly split, which is indicative of a lack of trader bias as to which direction the pair will take next.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.